Walbridge Indus. Process, LLC v. Vaughn Indus., LLC

472 F.Supp.3d 420

WALBRIDGE INDUSTRIAL PROCESS, LLC, Plaintiff

v.VAUGHN INDUSTRIES, LLC, Defendant

Case No. 3:19-cv-811-JGC

United States District Court, N.D. Ohio, Western Division.

Filed July 15, 2020

James R. Carnes, Shumaker, Loop & Kendrick, Toledo, OH, Keefe A. Brooks, Alexandra Stan, Brooks, Wilkins, Sharkey & Turco, Birmingham, MI, for Plaintiff.

Adam M. Borgman, David R. Hudson, Reminger Co., Toledo, OH, David T. Andrews, Law Office of David T. Andrews, Twinsburg, OH, for Defendant.

ORDER

James G. Carr, Sr. U.S. District Judge

This is a breach of contract action between a contractor, plaintiff Walbridge Industrial Process, LLC ("Walbridge"), and its subcontractor, defendant Vaughn Industries, LLC ("Vaughn"). Walbridge was the prime contractor for a project to build two data halls for VaData, Inc. (a/k/a "Amazon") ("Amazon").

Walbridge claims that Vaughn breached two subcontract agreements for the electrical work for what Walbridge designated as "Phase II" and "Phase III" of the project. Vaughn filed a motion seeking partial summary judgment (Doc. 23) on counts II (breach of contract) and III (promissory estoppel) of Walbridge's amended complaint. (Doc. 20).¹ Walbridge has filed a counter-motion seeking partial summary judgment on liability on counts II and III.² (Doc. 24).

For the reasons discussed below, I will deny Vaughn's motion and grant Walbridge's motion.

Background

In 2018, Amazon selected Walbridge as general contractor to build the data halls in New Albany, Ohio. (Doc. No. 24-2, pgID 145) (Scott Penrod Decl.).³ Walbridge contracted with Vaughn to perform the electrical work on Phase II of that project. (Id., pgID 146). Vaughn's president, Matthew Potts, executed a standard Walbridge form subcontract for the electrical work for Phase II of the Amazon project on November 28, 2018. Id.

Vaughn also was the low bidder on the electrical work for Phase III of the Amazon project. Id.

Vaughn's work included certain "early release" items, which are items that require a long lead-time between order and delivery to the worksite. Id. The contract referred to items that do not require such a lead-time as "full release" items. Id.

While Vaughn's work on Phase II was underway, Walbridge asked Vaughn to provide refreshed pricing for the early-release work to account for any market changes that occurred since Vaughn had submitted the earlier bid for the work. Id. Vaughn responded with an updated proposal for completing the Phase III early release work on January 4, 2019. (Id., pgID 146, 166-67). The introductory paragraph to the updated pricing proposal stated that the proposal was "based on the drawings and specifications by Ryan Fleming dated 05/16/2018." (Id. , pgID 166).

The total updated price for the early release work was $617,485. Id. On the same day, Walbridge communicated to Amazon the total price for all the early release items for the Phase III project, including Vaughn's updated price for the early-release electrical work and revisions that Vaugh had proposed. (Id. , pgID 146, 171-72).

Vaughn provided updated pricing on the full-release work for the project on January 11, 2019. (Id. , pgID 147, 176-83). On that same day, representatives of Walbridge and Vaughn met telephonically to go over the updated pricing for the full-release work on Phase III. (Id. , pgID 147). Walbridge refers to such meetings as "subcontractor proposal review" ("SPR") meetings. It uses a standard SPR form to memorialize the participants’ concurrence in certain differing or more specific terms than those in the original bid. (Id. , pgID 147, 206-11).

The SPR form included a section entitled "Scope Review," which contained yes/no boxes to record whether the subcontractor had "read and included certain documents in their proposal." (Id. , pgID 207). The parties checked the boxes incorporating: "General Conditions," "Special Conditions," "All drawings and specifications," "Addenda," and "Scope of Work." Id. The SPR form also included a checked box indicating that Vaughn accepted "Walbridge's subcontractor and Customer Contract Requirements." (Id. , pgID 206).

Walbridge and Vaughn representatives signed the SPR form indicating their agreement to its terms. (Id. ). The SPR document stated the base bid price for the remainder of the electrical work on Phase III as $3,733,526.⁴

On February 12, 2020, Walbridge received notice from Amazon to proceed with the early release items for Phase III. (Id., pgID 148). The same day, it sent Vaughn a document entitled, in relevant part, "Notice of Award and Limited Notice to Proceed" (the "notice"). (Id. , pgID 217-18).

The notice stated that Vaughn "ha[d] been selected to perform all necessary work required to complete the Electrical work for [the Amazon project]." (Id. , pgID 117). The work was to "include but not be limited to all required Electrical work ... as per the referenced Construction Schedule Drawings and Specifications and the Subcontractor's Proposal Review dated February 11, 2019." (Id. ). The notice further provided that "Walbridge shall forward you a standard subcontract for execution." (Id. ).

The notice provided that Walbridge "ha[d] the right to accept pending Alternates that have been submitted to the Owner for consideration." (Id. ). It did not, however, provide a definition of the term "Alternates."

As to the early release items included in the subcontract, the notice stated: "[a]t this time, Walbridge is issuing you a Limited Notice to Proceed, per the owner's instructions, for the following Early Release Work ... not to exceed $617,485.00. Subcontractor is NOT authorized to proceed with any work associated with this subcontract exceeding this amount until he receives written direction to proceed from an authorized Walbridge representative." (Id. ) (boldface in original).

Vaughn signed the notice as "Accepted and Agreed" and returned it to Walbridge. (Id. , pgID 218).

On February 14, 2020, Walbridge provided Amazon with its final pricing for the full scope of work on Phase III of the project. (Id. , pgID 148-49). That pricing incorporated Vaughn's bid for the electrical work. (Id., pgID 148-49, 220-24).

On March 10, 2019, Amazon issued a purchase order for completion of the electrical work on Phase III. (Id. , pgID 149); (id. , pgID 226-28).

On March 22, 2019, Vaughn sent an email to Walbridge that stated:

It is not Vaughn Industries’ intent to sign a subcontract with Walbridge to do the electrical work for Phase 3. We will honor our commitment to provide the busway under the February 12, 2019 Limited Notice to Proceed and cooperate fully with the electrical contractor.

(Id. , pgID 230).

On receiving that email, Walbridge obtained five bids for the remaining electrical work and selected the lowest bidder, The Superior Group. (Id. , pgID 149). That bid, which was for completing the remaining full-release electrical work and did not include the early-release work, was $4,047,803. (Id. ). Walbridge asserts that bid, when adjusted to include the amount already paid for the early-release work, was $931,762 higher than Vaughn's combined bids for the early-release work and the full work. (Id. ).

Standard of Review

Summary judgment is appropriate under Fed. R. Civ. P. 56 where the opposing party fails to show the existence of an essential element for which that party bears the burden of proof. Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

The movant must initially show the absence of a genuine issue of material fact. Id. at 323, 106 S.Ct. 2548. Once the movant carries its burden, the burden shifts to the nonmoving party to "set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Rule 56 "requires the nonmoving party to go beyond the [unverified] pleadings" and submit admissible evidence supporting its position. Celotex, supra , 477 U.S. at 324, 106 S.Ct. 2548.

"Where, as here, parties have filed cross-motions for summary judgment, the Court grants or denies each motion for summary judgment on its own merit, applying the standards described in Fed. R. Civ. P. 56." Williams v. Ohio Dep't of Rehab. & Corrs. , 2018 WL 500167, *1 (S.D. Ohio 2018).

Discussion

1. The Parties’ Arguments

Walbridge contends that the parties entered into a binding contract for Vaughn to perform the full scope of the electrical work necessary for Phase III of Amazon's project. In the alternative, Walbridge argues that it is entitled to recover under the doctrine of promissory estoppel.

Vaughn contends that: 1) the notice is not a binding contract but merely an agreement to agree; 2) if the notice is a contract, it is an illusory one because Walbridge had the ability to withdraw from it at will; and 3) the notice cannot support a promissory estoppel claim because its promises were conditioned on the future execution of a final contract document.

A. The Enforceability of the Parties’ Agreement

Vaughn contends that the notice was not a binding contract because it reflects the parties’ intent to execute another written agreement and the parties intended the terms of that later agreement to be binding. (Doc. 23, pgID 103-09).

The enforceability of agreements that the parties contemplate will lead to the execution of another agreement turns " ‘on whether the parties have manifested an intention to be bound by its terms and whether those intentions are sufficiently definite to be specifically enforced.’ " Champion Gym & Fitness, Inc. v. Crotty , 178 Ohio App.3d 739, 744, 900 N.E.2d 231, 235 (Ohio Ct. Ap. 2008) (quoting Normandy Place Assoc. v. Beyer , 2 Ohio St.3d 102, 443 N.E.2d 161 (1982) ).

Thus, "where all the substantial terms of a contract have been agreed on and there is nothing left for future settlement, the fact alone that it was the understanding that the contract should be formally drawn up and put in writing does not leave the transaction incomplete and without binding force, in...